Japan's trade data for October showed export values posted the second straight, up 3.6% on year, as the European economy continues picking up and Chian is slowly crawling out of the doldrums caused by its property market problems. By contrast, export volumes were down for 3rd straight month (-1.2% y/y), hit by the protectionist U.S. trade policy with stiff tariffs on autos and metals.

Key points:
--Exports +3.6% y/y (Sept +4.2%), 2nd straight rise; median forecast +0.8%
--Total export value ¥9.77 trln, 3rd largest on record, biggest for the month of Oct
trade:
--Imports +0.7% y/y (Sept +3.3%), 2nd straight rise; median forecast -0.9%
--Trade deficit ¥231.77 bln (Sept revised ¥237.36 bln deficit); 4th straight shortfall; median forecast ¥271.40 bln deficit
--Export y/y rise led by computer chips, engines, raw materials as largely expected; semiconductor-making equipment down
--Import y/y rise led by aircraft, engines, computers; drugs, crude oil, coal down
--Exports to US -3.1% y/y, 7th straight drop (Sept -13.3%), led by autos, chipmaking equipment, drugs; aircraft up but item fluctuates
--Exports to EU +9.2%, 3rd straight rise (Sept +5.0%), led by engines, computer chips, motorcycles; regional economy picking up
--Exports to China +2.1% y/y, 2nd straight rise (Sept +5.8%) on raw materials, computer chips, autos as seen in Sept; chip-making machines down

Japan’s export values are forecast to post their second straight year-on-year increase in October, up 0.8%, after marking a 4.2% gain in September for the first rise in five months. The recent economic recovery in Europe and solid demand from Asia appear to be offsetting the drag from the protectionist U.S. trade policy, which likely caused Japanese shipments to the key U.S. market down for the seventh month in a row in October.

The slight increase in wobbly exports is expected to be led by computer chips, raw materials and aircraft while those of semiconductor-producing equipment, auto parts and drugs are seen down.

Import values are expected to record their first drop in two months and the sixth for the year, down 0.9%, following a 3.3% rebound in September and 5.2% fall in August. The decline is seen led by crude oil and liquefied natural gas.

Combining those factors, the trade balance is forecast to post a fourth consecutive monthly deficit, estimated at ¥271.4 billion, following a revised ¥237.36 billion shortfall in September and a wider ¥499.95 billion deficit in October 2024.

Merchandise Trade balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.

Japan's merchandise trade balance measures visible trade and excludes services. Specifically it is the difference between imports of goods and exports of goods. A positive value indicates a trade surplus (exports exceed imports) while a negative value indicates a trade deficit (imports exceed exports). Movements in the trade balance reflect altered demand for Japanese exports which subsequently impact the yen's value and directly affect GDP growth because of the economy's dependence on trade.

The report gives insight into changing trends regarding Japanese trade. Such developments are especially important for Japan, which is an export-oriented economy that has historically experienced large trade surpluses and any change can have a dramatic effect on the domestic economy. Typically the headline number is the change from the previous year in yen along with the percentage change in exports and in imports from the previous year.